For BS-VI, lot of coordination was needed with carmakers too
Business Standard, Delhi 31-Mar-2020
Vehicles and the fuel they run on have to switch over to BS-VI emission norms before April 1. SANJIV SINGH, chairman of India's largest refiner and fuel retailer Indian Oil Corporation (IOCL), speaks to Jyoti Mukul & Shine Jacob about the three-year journey of transition. Edited excerpts:
How was the shift to BS-VI emission norms?
We began the transition to BS-IV in 2010 and completed it in 2017. For BS-VI, we started supplying the fuel in Delhi two years ago and last year covered the NCR and Agra. We did it, though we were given three years to roll out BS-VI from April 1. At the time of the BS-IV roll-out, refineries were producing both BS-IV and BS-III fuel. Refineries could produce BSIV by with only slight modifications. The bulk of the quantity continued to be old grade. In this case, the refinery cannot operate if it is not making BS-VI fuel. The major difference, apart from other things, is we go down to ultra-low sulphur, which is less than 10 parts per million (ppm), both for petrol and diesel.
We produce six-seven streams of both diesel and petrol, which we mix in different proportions, depending on the property of each stream so the final product gives the desired property - some may have very high or low quantum of sulphur. In the case of BS-VI, the entire volume has to be treated. We can't have anything that is over 10 ppm. We had to install more large units within the same refinery and hook up the system inside.
Emission and discharge limits have not increased for refiners. We installed additional units while the refinery was operating with the older pollution emission limits, which was a challenge. Everything had to be done within a short span. Even from the point of view of project management and award of contract, we adopted different processes so that we did not lose time. We are happy we set a tougher internal target that made it possible to move to BS-VI before the deadline.
What changes did you have to bring in evacuation of new grade petrol and diesel?
The primary movement of products is done through the same pipeline. In the pipeline, we put kerosene, diesel, and ATF. Between each product, we put a kerosene plug that had to have no sulphur, though normally kerosene has 2,000 ppm. It is a kerosene badge so that petrol does not mix with diesel. We used to put kerosene with 1,500 ppm sulphur content, while both sides we had 800 ppm sulphur diesel and petrol. We are now making special grade kerosene for pipeline transfer for which we needed to create necessary facilities.
Was roll-out in a single phase a challenge?
We implemented the earlier emission norms in phases. We started with tier-i and tier-ii cities before expanding. The advantage is you get more time to implement, but the disadvantage is you always require two supply chains. So, it is good that we are supplying only one grade now. This is a very superior grade fuel and is a continuous effort.
There were apprehensions that using BS-IV fuel in BS-VI vehicles could harm them. Is that true?
I am not an expert on that, but what we are doing is reducing sulphur. Sulphur at high or low levels is poison for catalytic converters in BS-VI vehicles. It can take sulphur content of 20 ppm or less, but it is only the converter that gets impacted. Anyway, we are supplying BS-VI fuel all over the country. An individual customer will not feel the difference.
Had the shift been done in phases, wouldn't it have created a problem of BS-VI vehicles being exposed to lower-grade fuel?
It is not that the engine will cease. It is only the catalytic converter's performance that is affected, and it can be replaced. But supplying different grades of fuel is also possible. The idea is to use BS-VI fuel in BS-VI vehicles because only then will there be benefits. The entire country is moving to BS-VI, and slowly all vehicles will be BS-VI compliant.
OMCS have asked for a price hike to recoup investment. Has the government agreed to it and will it be the right time for a hike as global prices are low?
We price our products at FOB (free-on-board) price of Arab Gulf for petrol and diesel. We had linked our prices to Euro-iv grade. Now, they will be linked to Euro-vi with a minor quality discount or premium that may vary from Arab Gulf. There is a small delta in the Euro-iv and Euro-vi prices that will be captured in our pricing. However, there is the issue of capital expenditure, which the global prices do not capture. Indian Oil spent around ~17,000 crore. OMCS together spent ~35,000 crore, and auto makers say they have spent about ~70,000 crore. We have raised the issue of price hike with the petroleum ministry. Though prices are deregulated in principle, we follow certain regulations. It is not that we fix a price that we want. We don't work on cost-plus model, it is a moving average of the previous 15 days. We need this hike, even if the prices had not reduced. We are producing BS-VI fuel since January, but are not getting that price. Besides, margins have been very poor.
How did OMC refineries coordinate? Were private refiners also part of this?
Every refinery was required to shut down. Existing units required a revamp, we had to make modifications and raise capacity. Hydro treatment for removing sulphur required hydrogen, so we had to put up hydrogen generating units. Plus, existing units had to be hooked up with existing systems. We can't do that alone. Two large refineries in the same region, even if they belong to different firms, cannot shut down at the same time. So, there was a lot of industry-level coordination, along with the ministry. Even today, if a HPCL refinery is shut, we will make sure that products of other refineries are available. There was coordination with private refiners as well, though they required fewer changes because they were producing higher quality of fuel for export. PSUS probably needed to change more, but private ones required some changes, too. It was well coordinated with other sectors as well. Carmakers needed BS-VI fuel to test their vehicles. We supplied the fuel wherever they wanted it.
